Structuring For Growth

by Ian MacDougall

Organizational Life Cycles

Businesses don't stand still; they are either growing or dying. Just like living organisms, every company goes through an organizational life cycle that consists of distinct stages of growth and decline. According to TEC speaker Ian MacDougall, each stage of the life cycle has certain identifiable characteristics that make it easy to determine how far a business has progressed.

Growth stages include:

• Courtship. The business is still but a gleam in the eye of the entrepreneur. Nothing concrete has happened yet, but the budding entrepreneur constantly plans, schemes and dreams about his business-to-be.
• Infancy. The entrepreneur actually launches the business. This stage is characterized by a relentless focus on sales and cash flow and getting the product out the door. Roles are not clearly defined and everyone does whatever it takes to get the job done. It is a time of high risk but also of fun and excitement.
• Go-Go. In go-go, the company begins to stabilize. It develops a solid base of customers and earns enough income to more than cover expenses. With the struggle for survival a thing of the past, the business grows very rapidly and seeks new opportunities. Employees, especially senior managers, still fill many roles, and there are few, if any, boundaries in terms of what people can and can't do. Everything is permitted unless specifically forbidden.
• Adolescence. The company continues on a strong growth track, but the lack of structure and organization causes problems internally and externally. The founder often hires a professional manager to install much-needed systems, procedures and controls, which causes a severe shock to the culture. Adolescence is a time of chaos, internal conflict and feeling like the company is out of control.
• Prime. Prime represents the peak of the growth cycle. The company has strong, profitable growth combined with good systems and controls. It is flexible and predictable and has developed a culture where everyone shares a common vision and works toward it. In addition to telling you how well it did last year, a prime company can also tell you how well it will do this year and then go ahead and do it. The company has become a well-integrated money-making machine.

Decline stages include:

• Stable. The organization looks and feels like a success, but it slowly, almost imperceptibly, shifts from a growth orientation to decline. The attitude becomes, "If it ain't broke, don't fix it." People do what is expedient rather than what is necessary. The organization begins to go stale as the focus shifts away from exploring the new and toward maintaining the status quo.
• Aristocracy. Aristocracy is characterized by declining market share and unproductive meetings in stodgy boardrooms. The company becomes more internally focused and increasingly loses touch with customers and the marketplace in general. It still makes money, but no new products get developed and the focus shifts exclusively to the past rather than the future. Creative go-getters leave the company in droves.
• Bureaucracy. The company has life-threatening problems, but rather than trying to solve them, management focuses on who to blame. At this stage, the customer is considered a nuisance. There is no real life in the organization. Unless a turnaround of major proportions takes place, the company will soon die.

"This life cycle holds true for every company, regardless of size, shape or industry," explains MacDougall. "Some companies move through the life cycle very slowly, others progress at light speed. The goal is to get to prime and stay there, a task made much easier when you have the proper management structure in place."

Four Essential Management Roles

According to MacDougall, organizations must perform four essential roles in order to succeed in the short- and long-term. These are:

• Produce Results (P). The P role produces results. What results? Those that enable the organization to meet the needs of its customers. The P role ensures that the organization does the right things. When the organization performs the P role effectively, the customer comes back for more.
• Administrate (A). If the P role focuses on doing the right things, the A role focuses on doing them right. The A role ensures that people do the right things at the right time in the right place in the right sequence with the right intensity. The P role makes the organization effective; the A role makes it efficient.
• Entrepreneur (E). The E role takes the organization into the future and makes it proactive rather than reactive. However, the E role is not the same as planning. Planning involves deciding what to do tomorrow after finding out what happened yesterday. Entrepreneuring involves deciding what to do today knowing that tomorrow will be very different.
• Integrate (I). The I role changes the consciousness of the organization from mechanistic to organic. It creates a "one for all and all for one culture" where people work together as a collective unit rather than as separate individuals.

"If any of these roles are missing, the organization will experience major difficulties," explains MacDougall. "However, because companies have different needs at each stage in the organizational life cycle, each management role takes on more or less importance depending on the phase of growth.

Structuring for Growth

In order to plan for growth, you have to understand which roles play the dominant role in each growth phase and structure the organization accordingly. Because each stage of growth places different demands on the company, different combinations of the four management styles need to come to the forefront as the company grows.

• Infancy. An infant organization has one primary goal -- survival. Consequently, it has to produce results like there is no tomorrow. At this point, you don't worry about how you go about getting new customers or making sales, you just do it. The primary activities that need to take place in infancy are:
• Acquire customers (P)
• Sell, sell, sell (P)
• Manage cash flow (P)

Therefore, the structure of the company must have a strong P orientation. The ideal management profile for infancy is Paei, meaning a strong focus on the P role, with less attention given to the other three. (Note: a capital letter indicates a dominant role for a particular phase; a lower-case letter represents a subsidiary role.)

• Go-Go. Go-go is a time of rapid expansion. Flush with early success, the company wants to leap at every opportunity that comes its way. During this phase, the primary activities of the organization are:

• Continue to grow sales (P)
• Develop new products (E)
• Acquire new product lines and/or expand into new businesses (E)

The company still needs to focus on producing results, but now must also expend energy and resources in the development of new products and services. The ideal management profile for go-go is PaEi.

• Adolescence. During adolescence, the unbridled growth of the go-go phase begins to cause internal and external problems. The last thing the business needs right now is any more new products or services. Instead, it needs to turn inward and develop systems and procedures to manage the growth. Primary activities of the adolescent organization include:
• Continue to produce results and grow sales (P)
• Institute budgeting and financial controls (A)
• Implement systems, policies and procedures (A)

For the first time, the company needs to look at how it produces results. Without some measures of control, the growth will continue unchecked and the company will implode on itself. The ideal management profile in adolescence is PAei.

• Prime. In prime, everything is hitting on all cylinders and the company has become a well-oiled money-making machine. Primary activities of the prime organization include:
• Continue to produce results and grow sales (P)
• Continue to refine systems, policies and procedures (A)
• Redefine what business the company is in (E)
• Integrate the culture (I)

For the first time, all four management roles have an equal and complementary position within the organization. As a result, the ideal management profile for a prime company is PAEI. In fact, a company doesn't reach prime until it can perform at a high level in each of these four areas.

"In the very early stages of growth, the dominant management roles happen as a matter of course," explains MacDougall. "For example, if you don't have a strong P role in infancy, the company never gets off the ground. So by default, the entrepreneur has to have a strong P profile. But as you move through the life cycle, it requires more of a conscious effort to ensure the company has the proper amount of each management role.

"For example, in adolescence, when the founder first introduces the A role into the company, people usually put up stiff resistance because they suddenly have to do things they have never done before, such as create budgets, submit expense reports and track key indicators. As a result, the founder has to make a deliberate and conscious effort to overcome that resistance and support the A role or the company will never make it to the next stage."

To manage the unique challenges of each phase of the growth cycle, MacDougall recommends the following steps:

• Identify which phase of the organizational life cycle currently applies to your company. Keep in mind that this has more to do with the attitude of management and the kinds of problems you face than your company's size or annual sales.
• Determine whether your current management structure reflects the ideal management profile for your phase. If not, identify what steps are needed to bring your management structure into alignment.
• Begin planning the new management structure for the next growth phase.

"You can't change the challenges and problems you will face in each phase," notes MacDougall. "Those are part and parcel of the organizational growth cycle. But by understanding the four management roles and making sure you have the proper structure in place, you stand a lot better chance of solving those problems and guiding your company to the next level of growth."

About the Author

Ian MacDougall is the founder and professional director of Corporate Lifecycles, L.L.C., an international consulting firm that helps companies implement large-scale organizational change. He has consulted with government agencies and organizations worldwide in a diverse range of industries, including manufacturing, publishing, retail, high technology, financial services, higher education, social services, defense and telecommunications. A TEC speaker for more than a decade, MacDougall has addressed TEC groups throughout the U.S., Canada and Australia, consistently earning high ratings for his enthusiastic presentation style and keen insights into organizational structures and the decision making process.